Lafayette, our sister city to the east, is once again experiencing an oil price crisis. Oil and gas companies became optimistic after the 2014 crisis when oil prices rose, but the coronavirus pandemic had oil prices Wednesday trading below $21 per barrel.
Mack Miller, the owner of Merlin Oil and Gas, a small Lafayette company that arranges onshore leases, told The Advocate, "I can tell you in unadulterated fashion, if these prices stay where they are, in six months, I will probably not be in business."
The newspaper said in 2016 the Lafayette-area gross domestic product shrank at the second-fastest rate in the country because of oil prices that bottomed out at $37 per barrel. Prices rose into the $50-$60 range, where they were at the start of this year.
Energy companies and related businesses comprised 29.4 percent of the Lafayette-area gross domestic product (GDP) as of October, according to the Lafayette Economic Development Authority's analysis of federal data. That was down from 45 percent in 2015, and roughly 70 percent in the 1980s.
The Advocate said Lafayette, in one way, may be better positioned to survive the current oil crash than previous ones because the city has attracted non-energy companies, particularly those in health care and technology. Houma, which has a smaller mix of similar businesses, isn't so lucky.
Unemployment in the Lafayette area grew 0.4 percent last year, similar to the statewide average, but the Bureau of Labor Statistics said Houma continued to lose jobs. That is because as panic over the coronavirus pandemic emptied airplanes, Saudi Arabia and Russia failed to agree on production cuts, and Saudi Arabia then doubled down by increasing product.
Eric Smith, associate director of the Tulane University Energy Institute, said the rest of the year is probably a "write-off," with pre-coronavirus prices sticking around through the end of 2021. Meanwhile, the Trump administration said it is seeking $3 billion from Congress to top up the country's strategic petroleum reserves, potentially propping up U.S. oil producers after crude prices crashed globally.
Although far from certain, state Economist Loren Scott said he thinks prices may begin to recover by June because the Russians won't be able to withstand a prolonged crash.
Scott probably spoke for most of us when he said the future is far from certain. For all of us, the good news we desperately need can't come too soon.